Oil and gas assets flood capital markets as groups eye exploration

More than $90 billion of global oil and gas assets are on the market as deal activity in the sector accelerates, according to industry estimates.

Driven by moves by the big oil groups to offload their non-core assets, the sell-off has gathered pace sharply over the past two years, according to Derrick Petroleum Services, the industry research and consulting firm.

The value of industry assets that were on the market in the middle of 2009 was just $20 billion and at the start of 2010, it was $46 billion.

The $90 billion-plus figure is all the more significant as it comes after a flurry of deal announcements in the past three months of this year, including significant asset sales by BP, the UK oil group.

The figure is the highest I have seen for at least 10 years said one industry executive. The $90 billion figure compares with an industry average of between $30 billion and $40 billion of assets for sale over the past three years, he said.

The jump in activity comes as international oil companies including BP, Royal Dutch Shell, ExxonMobil and ConocoPhillips have put substantial packages of assets on the block. The majority of sales reflect the groups‚ plans to shed non-core assets so as to raise funds to help pay for significant exploration and production programmes.

The world’s majors are under intense pressure to boost returns for investors. In recent years returns have come disproportionately from dividends and share buy-backs rather than from capital growth, prompting some industry watchers to compare the companies to utilities.

BP has led the way with plans to sell up to $30 billion of assets to help pay for the Gulf of Mexico spill although it has already sold close to $22 billion. Shell is selling some of its Nigerian assets while both BP and ExxonMobil have put some of their assets in the North Sea up for sale. Some substantial gas assets are also up for sale in Canada.

Industry executives said despite the levels of assets on the block, the market has been clearing as there is still “more money than assets‚” according to one executive.

A relatively stable oil price, between $70 and $85 per barrel, throughout the year has underpinned strong balance sheets.

The Chinese national oil companies have been the most aggressive buyers, notably in Latin America.